Crude oil futures failed to take advantage of the surprise three-million-barrel withdrawal from US inventories. It has been a seesaw affair for both US and Brent crude contracts as they have recorded massive gains one session and then posted substantial declines during another session. Is oil still going through a correction, or are the bulls waiting to make a move heading into the summer?
May West Texas Intermediate (WTI) crude futures tumbled $0.42, or 0.71%, to $58.91 per barrel at 15:06 GMT on Wednesday on the New York Mercantile Exchange. US crude prices have slumped nearly 1% over the last week, but they are up 22% year-to-date.
Brent, the international benchmark for oil prices, is flirting with $62. June Brent crude futures shed $0.45, or 0.72%, to $62.29 a barrel on London’s ICE Futures exchange. Brent is also down more than 1% over the last week, paring its year-to-date rally to below 21%.
According to the US Energy Information Administration (EIA), domestic crude stockpiles fell 3.5 million barrels for the week ending April 2. The market had anticipated a drop of 700,000 barrels.
Crude supplies at the Cushing, Oklahoma storage facility decreased by 800,000 barrels. Gasoline stocks increased four million barrels, while distillate inventories climbed 1.5 million barrels.
Although the US economy is reopening and more states are lifting restrictions amid the rollout of vaccines, other countries are experiencing fresh COVID-19 waves and resorting to new lockdowns and restrictions. Still, industry observers say that oil demand should pick up again, especially during the busy travel season.
That said, the rise in demand is likely to be offset by the decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to easing production curbs. Plus, reports suggest that the US could remove sanctions on Iran, which has been selling its sanction-discounted oil to China.
Fawad Razaqzada, a market analyst at ThinkMarkets, said in a research note that oil would face several key resistance factors moving forward over the next few months:
“So, I can’t see oil prices rising significantly further. Brent has already struggled to stay above $70 and WTI couldn’t stay above $65 for long. These will remain the key resistance levels going forward, and should prices rise again, I can’t see them holding above these levels for too long in 2021.”
In other energy commodities, May natural gas futures surged $0.067, or 2.73%, to $2.523 per million British thermal units (btu). May gasoline futures slid $0.0322, or 1.64%, to $1.9341 a gallon. May heating oil futures dropped $0.0221, or 1.23%, to $1.772 per gallon.